THE DEFINITIVE FOREX

HANDBOOK
VERSION 2022
CONTENT
INTRODUCTION

1. THE BASICS
1.0 - First of all
1.1 - What is Forex?
1.2 - Foreign exchange market (Forex)
1.3 - Who moves the price?
1.4 - Different types of charts
1.5 - Market hours/sessions
1.6 - Different types of trading

2. TECHNICAL ANALYSIS
2.0 - Supports and resistances
2.1 - More supports and resistances
2.2 - Trend lines and ranges
2.3 - Chart patterns
2.4 - Breakouts/breaks
2.5 - Moving averages
2.6 - When and how to take advantage of trends
2.7 - Price impulses (Momentum)
2.8 - Market Phases
2.9 – Volume

3. SUPPLY AND DEMAND

3.0 - All the basics
3.1 - Identifying Supply/Demand blocks
3.2 - Identifying the best Supply and Demand zones
3.3 - Volume as a confluence

4. MARKET MANIPULATION
4.0 - Why do they manipulate?
4.1 - Fakeouts
4.2 - The Quasimodo pattern
4.3 – Compression

5. JAPANESE CANDLESTICKS
5.0 - What are Japanese candlesticks?
5.1 - DOJI patterns
5.2 - Twins
5.3 - Dicks
5.4 - Hammers
5.5 - Envelopes
5.6 - Hanging Man
5.7 - Shooting star

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INTRODUCTION
Welcome to this exciting course. In it, we will take you from beginner level to a
fully professional level.

But first of all, let me introduce myself a little more.

My name is Alex, and I am a young trader with more than 4 years of experience
in the financial markets, especially in Forex. It was not until my third year that I
achieved 100% profitability, which cost me many hours of effort. During these
last 2 years of my life, I have dedicated myself to help other traders to train
body and soul. My vocation is to transmit my knowledge and help people to be
better people, both in their daily life and in their professional life. Throughout
this course you will realize that I really believe that to be a good trader, first you
have to be well with yourself and your life, because your day to day life will
affect your decisions when trading. But well, we will come back to this later.

One question my students have always asked me is: Why don't you create an
online course? You would help a lot more people than if you didn't train them in
person as you have been doing so far. And my students are right. But I believe
that, if it is not face-to-face, it is very complex to transmit all the desired
information in an optimal way. That is why it has taken me so long to create the
course, I had to make sure that ABSOLUTELY ALL the important information was
included and understandable, to really train the new traders of the future.

Now, let's get down to business. Remember, it is very important that you are
very clear about the following section.

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 1. THE BASICS
1.0 - First and foremost
Before I start talking about Forex, which there is plenty of time to do, I will share
with you some points that I think are essential to take into account before you
even start learning about the markets.
1. ESSENTIAL TO TAKE NOTES
When it comes to trading you have to take many things into account. In this
course I will give you all the ones that I think are essential and have helped me
to be profitable. But as before opening each operation I know that you will not
be able to reread all this course, it is very important to take notes with
everything that you really think is important. This way you will always be able to
review the information easily and believe me, taking notes will help you a lot.
2. LONG-TERM BUSINESS
Trading is not easy. Do not think that by buying this course tomorrow you will
be profitable. If you have been in the industry for a while you will have already
realized how it works. We will provide you with all the necessary tools to
become profitable, but after that it is up to you, your effort and dedication and
your ability to understand the concepts shared in this course.
3. ONLY 5% SUCCEED
In trading there is a very famous saying: 95% of traders lose 95% of their capital
in the first 95 days. It seems far from reality, but it is not. Our intention is not to
scare you, but to make you open your eyes. You have to see trading as if it were
a university degree, you have to suffer for a few years of training to finally start
generating income.
4. EFFORT AND DEDICATION
If you don't want to be in the 95% of traders, and you don't want to spend 10
years to be profitable. Our only recommendation for you is: EFFORT AND
DEDICATION. A common characteristic among all profitable traders is the
capacity of effort and dedication used to achieve their goals. You will also end
up being profitable if you set your mind to it, but without effort and dedication
it will be very difficult for you.

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1.1 - What is Forex?
Let's start with the subject matter.
Forex is a global, decentralized market in which currencies are traded. In its
simplest version:
If Peter wants to go on vacation from North America to Europe, he will have to
exchange his US dollars for Euros in order to spend in Europe. By exchanging
from '$' to '€', Peter is participating inthe foreign exchange market (Forex), because
he is buying euros with his US dollars.
But Forex still encompasses much more. If the Apple company is in North
America and wants to buy supplies from China, it will most likely have to change
its 'USD' to 'CNY'. Now Apple is participating in the Forex, and since Apple will
be exchanging significant sums of money, this will have a clear impact on the
market.
The word Forex stands for Foreign Exchange.
This concept is very simple and if it is not clear to you now, don't worry, as you
continue to learn and inform yourself, it will become clearer and clearer.

1.2 - Foreign Exchange (Forex)

In this section we will take the opportunity to delve a little deeper into the
foreign exchange market, also called Forex.
This market is the one with the largest volume in the world, moving about
5,000,000,000,000,000,000 per day, making it a highly liquid market.
The Forex market is open 24 hours 5 days a week. Opening Monday morning in
Sydney and closing Friday afternoon in New York.
The daily trading volume is enormous, and this market has become very popular
among private investors.
How is the money earned?
If the EUR/USD exchange rate is 1.10, this means that for every euro I exchange I
will get 1.10 USD.
As a trader my goal is to identify possible variations in the exchange rates. I,
as a trader, exchange 1,000 EUR to USD and I get 1,100 USD.
Thanks to my technical analysis I know that the exchange rate to USD will rise to 1.13 in
3 days. If I hold my USD for 3 days, it will become 1,130 USD.

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By exchanging my dollars back to euros, I will get about 1,015 EUR. Earning 15
euros trading Forex.
Now let's see what directions the price can take. In Forex, the price always moves in
one of three directions:
Upward trend: The price is increasing (the currency is worth more).
Downward trend: The price is decreasing (the currency is worth less).
Sideways movement: The price stays in a price range. (The currency does not
cost more, nor less).
Finally, it should be added that price changes in Forex are measured in pips
(point in percentage). It is the smallest unit of variation and in Forex, this is the
second decimal place from the end. For example:
GBP/JPY
The price for GBP/JPY increases from 137.456 to 137.492.
As we have said, pips are measured to the second decimal place from the end
(underlined). In this example it is clear that the difference is 4 pips. The way to
calculate it when the numbers are much more complex is very simple.
New value (without last decimal place) - Original value (without last decimal
place) * 100 = Difference in pips

137.49 - 137.45 * 100 = 4

Now we know what pips are and how to calculate the difference of two prices in
pips.

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1.3 - Who moves the price?
This will be a very brief section in which we will discuss who moves the price of
the Forex market.
But first, I want to clarify what are pairs in Forex. Forex is about buying and
selling crosses between pairs. The most traded pairs are: USD, EUR and JPY. Just
as in a tango you need two to dance, in Forex you need two pairs to trade. The
most common pair is EUR/USD, its price indicates how many USD one EUR costs.
Now you understand the pairs, let's go back to who moves the price in the
market. We have 5 main players.
- Banks
The main players in this market are banks. They are responsible for 50% of the
transactions that take place. Interbank market is another name by which Forex
is also known, this name refers to the exchange of currencies between banks
and institutions.
- Investment funds and investors
The second most influential in the market are investment funds and private
investors. These basically operate with money raised from their clients.
Depending on the volume of operations, they will have more or less impact on the
market.
- Companies
Large companies are also very influential in the currency market. For example, if
Apple is in the US and needs supplies from China, it will buy CNY en masse to be
able to pay in China. This increase in demand for CNY will cause the price to rise
for CNY as well.
- Central banks
Like the ECB (European Central Bank) these banks control certain regions or
nations. They have a huge influence on the market, as they control fluctuations
and interest rates (we will come back to this later).
- Retail investors
If you are just starting out in this world, you will most likely be part of this
group. Just like me when I trade from my personal account. You have to think
that you are part of the group that influences the market the least, and you are
going to compete against all the groups mentioned above. We do not need to
influence

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the market to be profitable. But we must understand how the groups operate
influential to 'surf the same wave'.

1.4 - Different types of graphics

Traders usually look at charts in three different ways. Either the price is
represented in candlesticks, bars or with a line.
- Line
The line is the simplest version. It simply calculates the average price fluctuation
over a given time range. As if I choose to view my chart in 1 hour timeframe,
then the line will be plotted by the average fluctuation in price during that hour.
Table 1, TradingView

This is what the line looks like on the charts. As traders, we can get little
information from this image other than that the price was in an uptrend much
of the time. That is why we do not like to use lines to analyze charts.
- Bars
The next chart format we will look at is the bar chart. This one conveys a little
more information. Each bar represents the price fluctuation in the desired time
frame. If each bar shows 1 hour, the left overhanging side reflects where the
price was at the beginning of the hour, the lower part shows the minimum price
during that hour, the upper area the maximum price during the hour, and
finally, the right overhanging side shows where the price was at the end of the
hour.

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 - Japanese candlesticks
This is by far the format of choice for most traders. From these charts we can
get the most information, it gives us the best confirmations and helps us find
the most optimal entries. Throughout this course you will see that we will
mainly use candlesticks when referring to charts.
Japanese candlesticks work in a very similar way to bars. In the image below you
can see it.
Maximum price

Close Open

Close
Open

Minimum price

Bullish vs. Bearish

The green/red part is the body of the candlestick and the sticks protruding from
the top and bottom are the candlestick shadows. Japanese candlesticks are very
easy to understand and give us a lot of information. As you complete the course
you will understand me.

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1.5 - Schedules/Market Sessions
As we already know, the Forex market is open 24 hours a day, 5 days a week.
That's why it's not a bad idea to know the market hours. Since the market is
divided into 4 operating zones. Sydney, Tokyo, London and New York. Below we
show you the active hours in the markets of each zone.
Table 2, image from FXStreet

The upper table is for winter time and the lower one for summer time. It is
important to know the active hours of each zone because if I want to trade the
USD, for example, I will be interested in trading during the New York session,
since it will be when there will be more volume around the USD (the price will move
more).
1.6 - Different types of trading
In this last section of 'The Basics', we are going to talk about the different types of
trading.
- Technical analysis
Trading based on chart analysis as we see it. These traders will use trend lines,
support and resistance, indicators and many other tools to extract as much
information as possible from the charts.
- Fundamental analysis
Another trading modality would be based on fundamental analysis. The main
concern for these traders is the news. A change in interest rates will have an
impact on the market, the fundamental analyst will be watching this news to
take advantage of this impact. Basically, the fundamental analyst bases his
trading on news.

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 - Swing trading / trend trading
This trading modality is considered more a modality that looks for
medium/long term entries. It is about joining the trend and holding the
position until it reverses. This type of trading allows entries with very little
risk and high profits. Swing trading is about buying when the uptrend starts
and selling when it ends.
- Intraday and scalping
The last type of trading that we will see in this section is short term trading.
Intraday and scalping look for short trades, of very few pips and in a reduced
period of time. If swing seeks to take advantage of the entire trend, scalping
is satisfied with a small part of it.
At this point you already know me, you also know the basics about the forex
market, the sessions, who moves the price and the different types of trading.
Now it's time to move on to the technical analysis section.

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 2. TECHNICAL ANALYSIS
2.0 - Support andresistance
Now, in this section we move on to the famous technical analysis. This we will
see now, is a very useful method/tool to analyze the charts. This kind of charting
is possibly the most used method by all traders in the financial markets.
First let's start by explaining what a support line is. Before I explain, I will show
you with an image.

13 7.5

As you can see it is very simple. The support line marks a certain price at which
the price bounces. The price comes from above, bounces and again continues
upwards.

It is very simple to understand, if you see that the price is respecting a certain
point, as in the first image would be 137.5. you are going to mark that price with
a line. What you will do next is wait for the price to return to this support line
that you have marked to start looking for purchases.

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 Possible price continuation

Area to look for Buys

Resistance follows exactly the same logic, but in reverse. In the case of
resistances, we look for areas where the price rise is slowed down, and then
falls. Making the same formation as with support lines, but from above.
Resistance lines can be very good selling areas.

On this Zone we’ll look for sells

As you can see in the first image on the previous page, the support and
resistance lines will not always be precise. There are always small variations.
That is why sometimes it is a good idea to draw support and resistance zones.

Resistance zone, we look for sells

Support zone, we look for buys

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We plot the zones to try to cover the lack of precision that a single line would
give us. This way we can better see where the price may turn around, finding
the best entries. Personally, I always draw a support/resistance line, and then
draw a zone above it, to cover the lack of precision. Finally, let's see how to
draw support/resistance lines WELL. The rules are the same, both above and
below.
Our intention is to make the line pass through the maximum number of points
respected by the price. On the next page, I will put a picture of a WRONG
resistance line. With red dots I will mark how many times the price respects the
line.

As you can see, the price has respected the resistance line 6 times. It is not bad,
but it could be much better. Now we are going to run this line a little more
down, so that the price respects more points of the line, so that the line
(resistance in this case) will be well drawn.

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As you have seen, just by moving down the same resistance line on the same
chart, the price has gone from respecting the resistance 6 times (as in the first
image) to respecting the resistance line 11 times. It is important when drawing
this kind of lines, that we have in mind to always mark it where the price has
respected a greater number of times, in this way we will get a maximum
accuracy.
Remember that exactly the same concepts apply to resistance lines as to
support lines. Only that in a support you will look for purchases and in a
resistance you will look for sales.

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2.1 - More supports and resistances
Now we will look at another concept that occurs when we work with support
and resistance. This is when, for example, a support is broken and it becomes
resistance. And vice versa, when a resistance is broken, it becomes a support.
This would look like this:

SUPPORT SUPPORT

RESISTANCE RESISTANCE

In the picture on the left side of the image you can see how the price respects
the resistance. After several touches the sellers decide to withdraw and this
resistance is broken (green circle), most of the time this resistance wil act as
support. On the right side of the image we can see the same thing in reverse,
the price respects a support and, after several touches, this support is broken by
sellers (marked with a green circle). As in the other example, this support will
now act as resistance.

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 SELL OPPORTUNITY

SUPPORT

RESISTANCE

This is how the concept of support becoming resistance would look on a chart.
The price respects a support (green rectangle), once the support is broken
(marked in red) it becomes resistance. Now our intention is to look for a small
retest and position ourselves in sale (blue circle). Placing our stop loss about 5
pips above the area.

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2.2 - Trend lines and ranges
As we saw in the first section of this course, price can take 3 directions.
Upward trend: The price is increasing (the currency is worth more).
Downward trend: The price is decreasing (the currency is worth less).
Sideways movement: The price stays in a price range. (The currency does not
cost more, nor less).
-Lateral Movement
In this part, we will see how to draw lines to help us analyze these 3 possible
trends. With the intention of finding the best possible entries.
Let's start with the sideways movement. If you have noticed, in the previous
exercise, the resistance and support zones, already indicate a lateral movement.

138

137

In this image we can see how the trend is sideways, and the price remains in a
range between 137 and 138. The currency is not more or less than 137 and 138.
Our intention is that the lines cover the maximum number of points respected
by the price.
The operation in sideways trends is very simple, in the resistance you look for
sales and in the support you buy. In the following image (next page) you can see
how the price enters a sideways trend, marked with a green square. The red
circles indicate possible purchases and the purple circles mark the points where
we could find possible sales.

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You must keep in mind that not always our Forex analysis will be fulfilled, as we can
see in the image, we find 3 sales at the resistance, but the fourth time the price
reaches the resistance, it breaks the price range. If we had placed a sell order
there it would surely be a loser, but before that circle we have already taken 3
good ones. In this case we would hit 3 sells and lose one. This would give us a hit
percentage of 75%. You understand the concept, don't you?
- Trend Lines
Now let's see how trend lines are drawn. But first, let's briefly review what
defines an uptrend or downtrend.

UPTREND DOWNTREND

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Uptrends are defined by higher highs and higher lows (HH: Higher Highs, HL:
Higher Lows). Downtrends work the same way, but in reverse. The price defines
lower highs and lower lows (LH: Lower Highs, LL: Lower Lows).
With trend lines, we intend to draw sloping support and resistance. Only if the
support and resistance lines are inclined, they become trend lines.

RESISTANCE TRENDLINE

SUPPORT TRENDLINE

In this image we can see a downtrend. The red lines are the trend lines, we can
see how they act as support and resistance. The operation in this case becomes
the same as in a lateralized trend. We buy at support (green circles) and sell at
resistance (orange circles).
Also, we must know that the price will not always form a channel as perfect as
in the image above, many times the trend line that acts as support, does not
match the trend line that acts as resistance. In the image that you will see in the
next page you will be able to observe it. Last thing I would like to add is that
trend lines are drawn like all the ones we have seen in this course so far. Trying
to pass over the maximum number of points respected by the price as possible.

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This image shows an uptrend. As you can see, the red bottom line shows a
poorly drawn TL (trendline). We consider that it is badly drawn because it does
not cover the maximum number of times that the price respects the slope. The
price only respects the red TL 2 times (red circles) instead, it respects 6 times
the green trendline (green circles) which is the one we have plotted right. It is
simply a matter of following exactly the same concept as with the common
support and resistance lines. Make sure that the line covers the maximum
number of times the price has respected it.
The last thing I want you to notice is that channels are not always perfect (a
channel is formed by 2 trendlines). In the image above, we observe how the
trendline above has a lower slope, they are not parallel.
The next thing you have to do is, open your trading platform (Metatrader,
TradingView etc.) and start analyzing the charts. You have to apply all the
concepts you have learned so far and normalize them completely. Until you just
open the chart and you can see everywhere: trend lines, support and resistance
zones, trends, ranges etc...

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2.3 - Patterns in graphs
In this essential section, we will deal further with price action. We will look at
different patterns/formations that occur on the charts. These can give us a lot of
information, whether it be a trend exhaustion, a reversal, a strong continuation,
and countless other things.
We can find a lot of patterns in the charts, but in this course we will only see the
most common and important ones.
- Double Roof/Triple Roof
Double and triple tops are possibly the most common patterns. They indicate
the exhaustion of an uptrend, and its subsequent reversal. The price forms a
resistance, which buyers do not dare to pass, and sellers wait anxiously to place
their sales. Thus, the price makes 2 touches (double) or three touches (triple) at
the resistance (ceiling) and a new downtrend begins.

RESISTANCE

NECKLINE

In this image we can see how the price forms a resistance and a neckline. The
operation in this case is very simple, once the price breaks the neckline down, it
confirms that the uptrend has been exhausted, and now the sellers are in
charge. We, as traders will start looking for sales. It is as simple as that.

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 RESISTANCE

NECKLINE

AFTER BREAKOUT, LOOK FOR SELLS

This is what the formation would look like on a chart. The triple top would be
exactly the same, but with 3 touches on the resistance. The last thing to
emphasize is, as I always tell you, not everything is always accurate in Forex, as
you can see in the roof formation the resistance line is not completely straight.
That is why it is always a good idea to wait for the neckline break, to confirm the
pattern and the subsequent sales.
- Double Floor/Triple Floor
Double and triple bottoms are exactly the same as ceilings, but inverted. The
price comes from a downtrend, makes two touches (double) or three touches
(triple) on a support line (floor) and subsequently a new uptrend is formed.

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 AFTER BREAKOUT, LOOK FOR BUYS

NECKLINE

- Shoulder head shoulder Shoulder head Shoulder head Shoulder head Shoulder
head reverse shoulder
This pattern/formation is also very common on charts. Like the double/triple
bottom/top, the shoulder head shoulder pattern also indicates a trend
exhaustion and subsequent reversal.
The normal head shoulder indicates that an uptrend is losing strength, and we
will most likely continue in a downtrend. This pattern can be tricky to recognize
at first, but with a little practice you will get the hang of it and see it
everywhere.
It is very simple: The price reaches and forms a high at a resistance, then the
sellers push the price down, but the enthusiasm of the buyers does not end and
after forming a new low, they push the price above the previous high. At this point
the veteran buyers get scared and start selling. The price reaches the previous
low and there are still few buyers willing to continue pushing the price up.
Which they do until they reach the first high mentioned above. Once here, the
buyers get rid of all the long trades, and make way for the 'shorts'.

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 HEAD

SHOULDER SHOULDER

NECKLINE

AFTER BREAKOUT, LOOK FOR SELLS

The ideal trade in these situations is always to look for a 'retest' (marked in red)
to determine the selling point. A retest is when the price returns to a
resistance/support/trendline etc, makes a small touch, and continues. This is
the best way to confirm chart patterns. Always waiting for the retest. This
formation on a chart looks like this:

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Now we will analyze it so that you can see it more clearly.

HEAD

SHOULDER
SHOULDER

NECKLINE

SELL AT RETEST

Once the price breaks the neckline, it is always advisable to wait for a retest to
start placing orders. Both in the shoulders head shoulder, as in the ceilings and
floors. Whenever a neckline is formed, it is recommended to wait for the retest
to confirm the pattern and the change of trend.
Now we will look at the inverted shoulder head shoulder. Very simple. As the
name suggests, it is a shoulder head shoulder, but inverted. Exactly the same
rules apply, with the only condition that now we are looking for supports and
not resistances, lows not highs and an exhaustion of a downtrend, to give way
to an uptrend, and not the other way around.
The inverted head shoulder is formed like this: The price arrives and forms a low
at a support, then buyers push the price up, but the enthusiasm of sellers does
not end and after forming a new high, they push the price below the previous
low. At this point the veteran sellers get scared and start buying. The price
reaches the previous high and there are still few sellers willing to continue pushing
the price down. Which they do until they reach the first low mentioned above.
Once here, sellers get rid of all short trades, and make way for long trades.

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 NECKLINE

SHOULDER
SHOULDER

BUY AT RETEST

HEAD

The operation is identical, to the normal shoulder head shoulder and to the
ceilings and floors. Break the neckline, wait for a retest and place orders
following the new trend. I recommend that you open the charts now and start
looking for these formations on them, until you get used to them.
- Continuation triangles
This is the last pattern we will see. I like this one, but it is not too reliable. Even so I
will show it to you because I think it is important that you understand the
concept behind this pattern.
In a bullish scenario, this formation occurs when the price reaches resistance.
But the buyers' enthusiasm is not over yet. What happens is that the sellers
push the price down at the resistance, but before reaching the previous low, the
buyers keep buying until they reach the resistance again. This process is repeated
several times forming a triangle, until the resistance is broken and the uptrend
continues.

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 IF PRICE BREAKS RESISTANCE, KEEPS BULLISH

RESISTANCE

In a bearish scenario, the pattern would be exactly the same but reversed,
instead of reaching a resistance, the price reaches a support. This means that
the sellers' enthusiasm is not over yet. What happens is that the buyers push
the price up at the support, but before reaching the previous high, the sellers
keep selling until they reach the support again. This process is repeated several
times forming a triangle, until the support is broken and the downtrend
continues. You will see this pattern on the next page.

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 SUPPORT

IF PRICE BREAKS SUPPORT, KEEPS BEARISH

On a graph, this pattern would look like this:

IF PRICE BREAKS RESISTANCE, KEEPS BULLISH

RESISTANCE

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2.4 - Breakouts/breaks
Throughout this course you will have read a lot about the word "break",
"breakout" or "breakout". A breakout is something very simple, when the price
breaks a support/resistance or a trendline that has been respected for a period
of time.

RESPECTING RESISTANCE

In this image we can see a clear breakout. We can see how the price comes from an
uptrend, but starts to respect a resistance (marked in purple). After some time,
the price finally breaks this resistance and continues its uptrend (marked in red).
The larger the body of the breakout candlestick, the more the breakout is
confirmed.
We have to keep in mind that there is also a phenomenon called false breakout.
This is a way for the big sharks to deceive retail traders in order to get more
liquidity in the markets. The explanation of a false breakout is very simple, the
price appears to have broken a structure, but after a while it returns. This
phenomenon is closely related to the stop hunt, which we will see later.
False breakouts are part of the market manipulation that we will see later. In
the image it is marked in yellow. To avoid falling into these traps, it is advisable
to wait for the confirmation of the movement. The best confirmation in these
cases is a retest (marked with an arrow). As in the

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chart patterns, when the price breaks a structure, it is always better to wait for
it to make a touch near it again, then we know it is time to place orders.

In this image we see how the price forms an uptrendline (marked in green).
After several touches on it, the price finally makes a breakout and continues in a
downtrend.
How can we predict when a breakout is going to happen? If you have been
trading Forex for any length of time, you will have already realized how
unpredictable the market can be. Even within this uncertainty, we can still get
an idea of whether a breakout is going to happen.
If the price reaches a resistance, we will only look for sales in the first 3
MAXIMUM touches in the fourth. When it reaches the fourth, it will most likely
break the resistance. In this case we will take the image used before, because
you can clearly see it. The price makes 3/4 touches and in the fifth it breaks the
resistance.

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 1y2 3y4

RESPECTING RESISTANCE

My recommendation to you is that, after a 3rd touch, expect a breakout at any

time. In the photo above, he makes 4 touches before breaking. To be as safe as
possible, we will always have the mentality of 3 touches breakout, and in very
exceptional cases, we will look for four touches prior to the breakout.

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In the example of the trendline, we can see how the preco performs 3 touches
on it and on the fourth one it breaks. Fulfilling our rule mentioned above. As you
have been trading for some time, you will realize that this 3 touch trick works
much better with trendlines than with supports and resistances.

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2.5 - Moving averages
In this section of the course we are going to look at one of my favorite
indicators. But first, I want to remind you that we are traders based on price
action, not indicators.
We are only interested in seeing how the price acts, regardless of the indicators.
Even so, moving averages can help us with confirmations when trading. We
don't want you to focus too much on this section, since it is possibly the least
important section of the course (in my opinion). But it is important that you
understand the concepts and know how to use this indicator.
Basically a moving average is a mathematical calculation that shows a line on
the chart. The mathematical calculation is as follows:

SMA = (Sum of the price value of n periods) / n

If you choose a 20-period average, the computer will add the value of the last 20
periods and divide by 20. If this operation is repeated over and over again for
each new candle the chart gives us, we will eventually have a line running
through our price. The most commonly used averages by all traders and
institutions are the 15-period, the 50-period and finally the 200-period, but over
time you will see that most really profitable traders do not use any of them.
Next, we will see the use that we can give to the moving averages. There are an
infinite number of strategies and different uses for them, but here we will see
the ones that have worked best for me throughout my life, which are the
following.
- Use averages to identify the general trend
- Using averages as dynamic support and resistance
- Crossing in between
- Determine indecision

On the next page we will begin to give examples of each of these uses.

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 - Using averages to identify the general trend
To interpret the general trend using averages there are two things we can do.
The first is to follow this rule: If the price is above the average, we are in an
uptrend and we are only interested in looking for purchases. On the other hand,
if the price is below the average, we consider that we are in a downtrend and
we will only look for sales. In this case, the most common averages are between
50 and 200 periods.

WE ARE LOOKING FOR SELLS

PRICE BELLOW MOVING AVERAGE = BEARISH

As you can see, following our rules, the price is below the moving average, then
we consider that we are in a downtrend and we will only want to enter the
market on sales.
The other way we can identify the general trend with averages is based on
where the moving average is pointing. If we see that it is pointing up, we will
consider ourselves to be in an uptrend, regardless of where the price is located
around the average. We will only be looking for buying. If it points down, we will
consider ourselves to be in a downtrend and will only be interested in selling.
On the next page you can see what I am referring to.

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 WE ARE LOOKING FOR BUYS

MOVING AVERAGE POINTING UP = BULLISH

This is what it would look like in a bullish formation. The average is pointing up,
following our rules this means we are in an uptrend and will only be looking for
buying. Next, we will see it in a bearish scenario.

MOVING AVERAGE POINTING DOWN = BULLISH

WE ARE LOOKING FOR SELLS

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 - Using averages as dynamic support and resistance
This is possibly the best known method of using averages in the markets. As we
have seen before, when the price reaches a resistance, it is in our interest to sell
and when it reaches a support, it is in our interest to buy. This can be applied to
moving averages as well. When the price is below the moving average, we will
consider that this average is a moving resistance, since it is not a straight line
and is constantly changing, we call it dynamic resistance.
The operation in this case is very simple. It is exactly the same as when it is a
normal resistance. When the price reaches it, we sell (it is always better to
combine with more confirmations). This would look like this:

MOVING AVERAGE ACTS AS RESISTANCE, WE ARE SELLING

We can see how the price is below, so the average is acting as resistance. Once
the price makes a small retest on it (red circle), we know that it is a good
opportunity to enter in sale.

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In this example we see the same scenario, but inverted. When the price stays
above the moving average and we use this as a dynamic support.

MOVING AVERAGE ACTING AS SUPPORT

RETEST AND BUYS

From my experience, the two best periods to use as dynamic support and
resistance are the 50 and 200 period moving averages.

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 - Crossing in between
We can interpret the crossover between averages in a thousand different ways.
In this course we will show you the one I have used for many years. For that we
need 2 averages in particular, the 15-period and the 50-period.
I have always used the crossover between averages to see when a trend ends
and a new one begins. For example, if we come from an uptrend and the price
reaches a resistance, my way of confirming that this resistance is going to act as
such and the trend will change downwards is to wait for a crossover between
the two averages mentioned before.

MOVING AVERAGE CROSS = NEW TREND

As you can see the price reaches the resistance marked in pink. As we will know
when is the trend change confirmed? Well, following our rules, when the 15-
period average (orange) crosses the 50-period average (blue). Once this
happens, we will start looking for entries.
To confirm the exhaustion of a downtrend and a subsequent uptrend, we would
use exactly the same concepts learned but in reverse. We would wait for the price
to reach support, then wait for the 15-period average to cross the 50-period
average and then we would confirm the new uptrend and look for buying.

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 - Determine indecision
The last use I have had for moving averages throughout my professional career
has been to determine indecision in the markets. When a market is indecisive,
the price does not take any trend, i.e., it stays in a range. It can be good for us to
know when there is indecision to liquidate our entries, prepare for a strong
breakout or to know what phase of a trend we are in.
I have always looked at indecision with the 15-period moving average. And it's
very simple to see, when you see that the price has been above it for quite
some time, we can determine that the market is indecisive. Buyers are afraid to
keep buying, and sellers are afraid to keep selling. This would look like this on a
chart.

In this red circle we can see a very clear period of indecision. When the price
stays constantly above the 50-period moving average (marked with a red circle),
it is telling us that the people trading at the moment do not quite know which
way the price will go and have not quite decided in one direction or another.

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 2.6 - When and how to take advantage of the trend
In this section we are going to delve a little deeper into what is trading. Specifically,
trend trading, one of the most popular among traders.
In this section you will learn how to trade trends, but first of all, let's briefly
review trends.

Backspace

Impulse UPTREND DOWNTREND

This is something you should remember without exception. An uptrend is

formed by higher highs (HH, Higher Highs) and higher lows (LH, Lower Highs).
On the other hand, a downtrend is formed by lower lows (LL) and lower highs
(LH). Also remember that the market always moves by impulses and pullbacks.
Another thing to keep in mind is that depending on which timeframe you are in,
as far as candlesticks are concerned, you may be in one trend or another. For
example, in a TF1D timeframe there may be a very clear downtrend, but as the
price is retracing, in TF1H you will most likely see an uptrend.
We will now look at this concept in the graphs.

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Here we can see a chart in the 1 day timeframe. You can clearly see how the
price is in a downtrend, but now we will see what happens if we look at the
same chart in the 1 hour timeframe.

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 The piece that we see in the image
with timeframe 1 hour is only this
one. And as you can see, even though
the chart in TF1D is in a downtrend, in
TF1H we see that thelast
It was in a very strong uptrend for 2
days.

What we want you to learn from this is, if you want to trade trends, rule number
1 is: Always follow the trend on a fixed timeframe. If you trade trends on the 1H
chart, ONLY follow the trend you see on the 1H chart. If you trade on the 5
minute timeframe, only look at the trend of the 5 minute chart, and so on for
each timeframe.
In the following, we will see what kind of trends exist and further on which
operative to follow in each one of them.
Strong Trend: A strong uptrend is a trend in which the enthusiasm of the buyers
far outweighs that of the sellers. By this I mean that there are hardly any sellers
in the market and the trend is up very strongly, with almost no retracement. The
image on the previous page in the TF1H shows a strong trend, as you can see
there is hardly any pullback.
Healthy Trend: In a healthy uptrend the buyers are in control as well, but there
is a little more enthusiasm on the part of the sellers, or simply buyers selling
their positions. This causes the price to move in clear impulses and pullbacks.
Weak trend: In a weak uptrend, buyers and sellers struggle to take control of
the trend. We could consider this an indecisive trend, although buyers have a
slight advantage.
To trade trends you can follow two strategies. The first is to enter on a breakout
and the second is to enter on a pullback. Before determining which strategy to
follow, you must first identify which trend you are in.

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If you are in a strong trend, you know that the price will hardly make any
pullback, so you have to focus on the breaks of small resistances/supports that
may occur. Now we will see a picture of these breaks in an uptrend.

In this rectangle you can see a strong uptrend. This is forming small resistances
along its rise (marked in gray), the operation is very simple. Wait for the price to
break this resistance formed and enter in purchase. In this example we have
seen 3 resistances forming, and 3 breaks of them. If at each break we had
entered into a buy position, we would have very good results.

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In a healthy trend, the price forms clearer impulses and pullbacks. This gives us
the opportunity to look for entries with less risk on pullbacks. Next, we will look
at this scenario in a downtrend.

In this image, we can see that the price is in a healthy trend because it forms
clear impulses and retracements. In this case we can follow two different
operations. Enter on breakouts (not recommended) or enter on pullbacks.
Forget about entering on breakouts because they require a little more
experience in this case. But you can look to enter on retracements.
You can determine these retracements by marking trend lines, with supply and
demand that we will see later or with simple support and resistance lines. As
you get more practice you will be able to identify retracements with ease.

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Finally, we will see how to trade a weak trend. As you already know this is a
somewhat indecisive trend, so the best way to trade it is based on support and
resistance. In this kind of trend the impulses and pullbacks can be very wide,
which makes the operation of breaks a very complicated task, something that I
do not recommend, but you can also do is to enter in the pullbacks, NOT IN THE
BREAKS. But from Snipe always defend ourselves in the weak trends to operate
following the supports and resistances.

In this image we observe a weak downtrend. As you may have noticed, breakout
trading is almost impossible and entering retracements from trend lines is also
impossible. That is why we always recommend trading weak trends with
support and resistance. With a red oval we have marked the best resistance
where we could position ourselves to sell.
How are we going to place the SL?
If we are in a strong uptrend, and we enter a breakout, we want to place the SL
below the last broken price (resistance).

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In a healthy uptrend, we can place the SL in 2 places. The first is to place our stop
below the previous low and our second option would be to draw a TL and place it
below it.
Finally, in a weak trend, if we enter to sell at a resistance we will place the SL
above it, if we enter to buy at a support, we will place the SL below it and if we
can trace for example a bullish trendline to enter to buy, our stop will go just
below it.

Remember that you must always follow a clear strategy in Forex, and commit to
it 100%. It is not worth taking things from one place and another, mix everything
and enter the market without well defined rules. We must always have the reason
for our operation very clear, and when it is not clear, we do not operate. In this
case, if you have to choose one of these three trend trading strategies, the one
you choose will have to be defined in a separate paper, and only position
yourself in the market when all the rules are fulfilled.

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2.7 - Price impulses(Momentum)
This section will be devoted to the strength of price impulses. First of all, let's
take a good look at what price impulses are. As we have seen previously, the
market moves in impulses and pullbacks. Impulses are when the price picks up
strength following the trend and retracements are when the price returns in the
opposite direction to the trend to retest. In an uptrend it would look like this.

RETRACEMENT

IMPULSE

RETRACEMENT

IMPULSE

It's simple, in an uptrend, when the price goes up, it is pushing up, when it goes
down, it is pulling back.
In a downtrend when the price goes down it is pushing up and when it goes up it
is pulling back.
When we deal with resistance, when the price goes down it pushes up, when it
goes up it pulls back.
Finally, with supports, when the price rises, it rises, and when it falls, it falls back.

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When we talk about momentum, we talk about the strength of the impulses,
you can also talk about the pullbacks, but generally about the impulses.
Basically, if in an uptrend the impulses are full-bodied candles, of the same color
and the price in general rises strongly, we consider that it has good momentum
or a strong momentum.
When in an uptrend the price rises slowly, generating many candles with little
body, it means that there is no momentum or little momentum.
We will now look at this concept of momentum on a chart.

In this uptrend we see rectangles of different colors. The green ones indicate
strong upward momentum, and the purple ones indicate little upward
momentum.

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We say that one is strong because the candlesticks have more body and there
are many of the same color in a row, whereas when there is little momentum it
is because the candlesticks of the same color are not repeated so much, there
are more retracements and the body of the candlesticks is small.
We will now exemplify this in a downtrend. The green rectangles are where
there has been strong momentum and the purple rectangles are where the
momentum has been moderate.

Why is momentum so important?

As scalpers, it is very important that we understand price momentum to know
when it is the best time to position ourselves in the market, not to wait too long
to close positions and to make sure that the speculative move will occur.

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Momentum is a very good indicator of volume. Generally, when momentum is
strong, it means that trading volume is higher. From my experience, it is best to
enter when there is high volume.
Personally, I try to enter when the momentum starts to pick up.
How do I know? There is usually more momentum at the beginning of and
during sessions. This is when a greater volume of transactions are traded, giving
greater price fluctuations in short periods of time.
What we are interested in momentum is that the price meets our analysis in the
shortest time possible, so that we are not too exposed to the market. The more
volume there is, the bigger and sharper the market movements will be, which
means that there will be a good momentum, which is what we are looking for.
For example, if we are trading a pair with USD, we will be interested in
positioning at approximately 8:00 GMT +0, when the New York Stock Exchange
opens. If we are trading a EUR pair, we would be interested in positioning at 1
GMT +0, at the opening of the London Stock Exchange.
You have the timetable at the beginning of this manual, just convert it to your
GMT. My recommendation is that you now open the charts and observe the
noticeable increase in momentum that always occurs at the openings of the
stock markets of the respective pairs.

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2.8 - Market Phases
Next, we will look at the phases of the market. We have 3 distinct phases,
Accumulation, Reaccumulation/Redistribution, Distribution.
Distribution is the upper block of an uptrend, accumulation is the block at the
end of a downtrend, and reaccumulation and redistribution are the blocks that
form in between the accumulation and redistribution blocks.

DISTRIBUTION

RE-DISTRIBUTION

ACCUMULATION

This is what it would look like on a chart. After the accumulation zone, we would
expect the price to form new highs and start a new uptrend, to give way to new
re-accumulation and distribution blocks. On the next page you can see an
example.

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 DISTRIBUTION

RE-ACCUMULATION

RE-DISTRIBUTION

ACCUMULATION

In a bullish cycle, in the accumulation phase, the most experienced investors,

those who know how to find the cheapest price to position themselves, are the
ones who buy the most during the accumulation phase.
When the price reaches the re-accumulation zone, swing traders (trend
followers) and those traders looking for strong momentum come in.
When the price finally reaches the distribution zone, it means that the
enthusiasm of the buyers ends, then they liquidate their positions and more
people join in selling, giving way to the next phase in the bearish cycle, the
redistribution.

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Following the theory of phases, the market will draw the price trends. After
years of experience and a lot of backtesting, I have realized that this theory is
not always true, but it is essential to know it because sometimes the market
respects the phases and it is in our interest to identify them in order to enter
following the trend.
The logic that follows is simple:
DISTRIBUTION

DISTRIBUTION

RE-DISTRIBUTION

RE-ACCUMULATION

RE-ACCUMULATION

RE-DISTRIBUTION

ACCUMULATION

ACCUMULATION

ACCUMULATION

In this image we can see how the market phases are forming an uptrend.

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2.9 - Volume
Now we will move on to possibly one of the most essential sections for Forex,
we will see what volume is and how to interpret it. First of all, let's be clear
about what volume is.
When we talk about volume in Forex we are referring to the total number of
transactions that are taking place in the market. The more transactions that
happen, the higher the volume.
Next, I will give you an analogy to exemplify this concept. Imagine the market in
your town, where you buy fresh fish, vegetables, etc...

Illustration 1, Photo from 20minutos.es

Imagine you walk in at noon and you only have 30 minutes. Once inside you see
a lady buying vegetables in a corner and another man buying at the bread stand.
Then you buy fish and before the 30 minutes are up you leave.
What does this mean? In this example we could say that the volume of 'the
market in your town' has been three transactions in the last 30 minutes. Well,
this same concept applies to Forex when we talk about volume.
Let's say we are in the EUR/USD market and we choose 1 hour candlesticks.
How can we know the number of transactions in that hour? Thanks to an
indicator called volumes (in the mt4) we will be able to know how many
transactions have happened in the EUR/USD market during each hour.
Volumes is by far our favorite indicator, but you should know that there are
countless indicators to represent volume on charts such as ADX, ROC, CMF etc..

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The volumes indicator looks like this on the graphs (marked in green).

We can see how the indicator forms a bar chart. Each bar indicates the volume
of transactions in a specific time frame. If you take the 1H candlesticks, each bar
of the indicator will show the volume of transactions in that last hour.
Obviously, the higher this bar is, the higher the number of trades.
Before continuing, it is also important to note the correlation between the
volume increase and the price movement. It is clear that when the volume
increases a lot, the price also starts to move with more force, (there is more
momentum) as we can see thanks to the ovals. In the vast majority of cases,
more volume equals more momentum.

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How shall we interpret the volume?
There are 2 main reasons why we use volume when analyzing currency markets.
First reason, to identify the best areas. Second
reason, to take advantage of the momentum.

To identify the best areas

When, for example, we have identified a trend line, our way of making sure that
this area is really good is to check it with the volume indicator. We will know if it
is good or not if the volume increases a lot when it reaches the trend line zone.

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As you can see in the image on the previous page, every time the price reaches
the trend line we have marked in green, the volume increases considerably. This
means that the trend line is being respected by the price. Every time the price
reaches the TL, the volume of transactions increases (in the case of the image
above we can see how the sales increase when reaching the TL), because we
already know that this is an area that many people are watching and that can be
key.

This is the same example, but applied to a resistance zone. As you can see,
whenever the price reaches the resistance zone we have marked, the volume
increases significantly. This indicates that this is an important area where there
is a lot of price activity.

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Now you know the volume indicator and how to apply it to your trading. Next,
we will look at our other way of using volume.
To take advantage of the momentum
We have already covered this a bit in the momentum section, but still, let'stakea
brief look at it. We are interested in entering when there is more volume, so
that the momentum is stronger and our analysis is fulfilled in the shortest
possible time. For this, you can use indicators, but we are going to show you
how to identify good momentum without indicators.
In all markets the volume increases a lot when their exchange opens. For
example, in pairs with USD, the highest volume will always occur at the opening
of the New York Stock Exchange. In EUR pairs, there will always be an increase
in volume at the opening of the London Stock Exchange.
Personally I like to enter when the stock exchanges open. In Spain the London
Stock Exchange opens at 8am, so I have from 7:30am to 9:30am to position
myself in the market. By doing so, I will be sure to take full advantage of the
momentum and will be able to liquidate my positions as soon as possible.

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In this chart of the EURUSD, which we can see in the image on the previous
page, each blue line delimits the opening of the London stock market and as you
can see, when the stock market opens is when the price picks up the most
momentum. Our intention is to position ourselves as close as possible to these
blue lines.

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 3. SUPPLY AND DEMAND
3.0 - All the basics
At this point we already know all the basics of technical analysis. Now, our
intention will be to apply supply and demand to technical analysis. But, first of
all, let's take a brief look at what supply and demand are.
It's as simple as that, SUPPLY = SELL, DEMAND = BUY.
When we say that there is a lot of demand in a market, we are referring to the
fact that the pressure from buyers is much greater than that of sellers, pushing
the price up.

If we say that there is a lot of supply, we mean that there is no buying pressure,
but there is selling pressure. This means that the price will be pulling down.

DEMAND
SUPPLY

EQUILIBRUM PRICE

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The price of the markets is governed by supply and demand. When these two lines
meet, we have the equilibrium price, this is the price on which we trade on the
charts.
How can we apply this concept in the markets?
Support lines usually act as a potential demand zone. This happens because when
the price drops low enough to reach a support zone, the price becomes too
cheap for more sellers to join in. At support, the price is cheap enough for
buyers to decide to buy and this causes a decrease in supply and increases
demand. Finally, the price reacts to support and buyers take control.

As you can see, when the price reaches the support zone (marked in yellow),
sellers will no longer sell so cheaply and buyers will start buying at this attractive
price. This means that when the price reaches support it shoots back up.

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On the other side, resistance often acts as a bidding zone. When the price
approaches resistance, it becomes too expensive for more buyers to join and
sellers start to enter. This means that when the price reaches resistance the role
changes from buyers to sellers and the price starts to fall. In the following image
you can see them.

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3.1 - Identify Supply/Demandblocks
After years of experience and a lot of training, I have been able to see the
evolution of the market, the transition to new cycles, big falls, big rises in value
and many other things. This has brought me some very good moments and
some not so good ones. I must congratulate you for having found this manual.
Now I will proceed to explain what has worked best for me throughout my
career as a trader, the blocks of supply and demand.
These blocks work in a very simple way.

PERFECT BUY ON RETEST

SL FEW PIPS BELOW ZONE

SL FEW PIPS ABOVE ZONE

PERFECT SELL ON RETEST

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In a bullish scenario, the price rises to form a block/congestion zone. After some
time the price breaks this congestion zone to the upside. At this point our task is
to wait for a retest in the zone to position ourselves to buy.
In a bearish scenario it would be the same reversed. The price goes down to
form a block/congestion zone. Next, it breaks this block to the downside and we
as supply and demand traders will look for sales in the retest to the zone. We
will now look at this concept on the charts.
In a bearish scenario:

The price descends until it becomes congested in a zone. Once this congestion is
broken to the downside, we will wait for a retest to position ourselves to sell,
placing the SL at 5 - 10 pips above the zone.
Now look at the risk:reward ratio of the operation. As you can see, by applying
these supply and demand blocks the profit can be much higher than the risk.
On the next page we will see the upside demand blocks on the charts.

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This is what the formation of this kind of block would look like in a rising market.
Before we continue, it is important that you open the charts and start to
backtestear this concept, you will see how well respected the supply and
demand blocks are, you will also see that very good entries can be made thanks
to them. Remember, our target is always a few pips.
But there is also another kind of blocks, the reversal blocks. They are followed
by a congestion zone, but the difference with respect to the others is that, if for
example we are in a rising market, the congestion zone will be broken down,
and we will look for a retest from below to position ourselves for sale. In the
next page you can see this concept.

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 PERFECT BUY ON RETEST

SL FEW PIPS BELOW ZONE

The price arrives from a downtrend, gets congested in a zone, breaks this zone
to the upside and once the retest is done, we position ourselves to buy. Placing
the SL about 5 pips below the zone.

SL FEW PIPS ABOVE ZONE

PERFECT SELL ON RETEST

In this case we see how the price rises to form a block, breaks this block to the
downside, we wait for a retest and we position ourselves to sell, placing the SL
about 5 pips above the zone.
We will now look at this concept in the graphs.

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 CONGESTION ZONE

SELL ON RETEST

This is what it would look like in a sales scenario. In a buy scenario it would look
like this:

BUY ON RETEST

DEMAND ZONE

This concept of blocks is extremely important that you practice it and do a lot of
backtesting to understand and standardize it.

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3.2 - Identify the best Supply and Demand zones.
The first step in determining the quality of the bid and ask blocks is to look at
the time the price has spent in them. If the price is in the block for a long period
of time, that zone becomes dangerous. The stronger and faster the rejection,
the better the quality of our zone.

STRONG REJECTION TO ZONE

= NICE BUYS ON DEMAND
STRONG REJECTION
= FRESH DEMAND

This is an example of a good formation of a demand zone (marked in red),

because the price strongly rejects the zone. Then, marked with a blue circle we
can also see a retest with a good strong rejection, which indicates that it is a
good buying opportunity.
On the next page we will see a medium quality zone. Here the price is for a
longer period of time.

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 PRICE FOR SOME TIME ON ZONE
= MEDIUM QUALITY ZONE

The price remains for a long time in the bid zone, which indicates that this zone
can be risky. In this case we can see how if the retest followed by sales have
been fulfilled on 2 occasions (marked in blue), but the third time no longer. That
is why we try to look for trades that are not too long, the market can turn at any
time.

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In the following image we will see an example of a very risky zone. As the price
stays in the zone for a long time, our retest and sell analysis is not fulfilled.

PRICE LONG TIME ON ZONE

= HIGH RISK ZONE

SUPPLY NOT RESPECTED

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When we talk about quality zones we are referring to this image below. The less
time the price is in the area, the safer and better quality it will be.

FRESH ZONE MID RISK ZONE HIGH RISK ZONE

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3.3 - Our preferred way to find supply and demand areas
The logic behind the best supply and demand zones is as follows:
We look for an area of indecision, and then we look for the price to decide in
one direction or the other very strongly. How can we identify this on the charts?
Quite simply.
We are looking for an indecision candlestick, or more than one together. An
indecision candlestick is basically a candlestick with very little body and wicking
above and below. To finish defining the zone, we look for the candlestick
following the indecision candlestick and make sure it has a lot of body and little
wicking. In this case the bid/ask zone will be the indecision candlestick.

INDECISION CANDLE

CANDLE WITH LARGE BODY

As can be seen in the image, we can see an indecisive candlestick followed by

another full-bodied candlestick. As the full-bodied candlestick is bearish, we are
going to focus on this zone as a supply zone. On the next page you will see how
we would determine the zone and trade in it.

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SL SOME PIPS ABOVE ZONE

SELL ON RETEST

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3.4 - Volume asconfluence
This section is important to nail it down with the supply/demand zones. What
you will learn is how to use volume as a confluence when plotting supply and
demand zones to ensure you have the most powerful zones.

Here we can see how the price forms a bearish bid block. In the circle below, we
can see that the volume has increased considerably. This tells us that the zone is
very good and that the strength of the downtrend is also good. Our objective is
to look for sales in the bid zone and as you can see, the price makes a very good
rejection of the zone and gives us a very good sell entry.
In short, what we are looking for is a lot of volume in the supply and demand
areas to confirm that they are of high quality.

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 4. MARKET MANIPULATION
4.0 - Why do they manipulate?
Market manipulation refers to the action of artificially inflating or deflating the
price of a security or otherwise influencing market behavior for personal gain.
Manipulation is illegal in most cases, but can be difficult for regulators and other
authorities to detect. (definition by "ElTrading")
The real reason they do this is to fill their orders and drive the price in the
desired direction. As traders we must accept that this phenomenon happens
and we must take it as part of the business. Most of the manipulation occurs in
the short term, but don't be fooled, in the long term it can also occur, but as
scalpers we can benefit from it by forming profitable trends.
Some manipulation techniques are as follows:
Wash trading
In wash trading operations, the manipulator sells and buys back the same asset
in the market in order to generate activity and increase the price.
Cornering the market
By cornering the market, manipulators buy a sufficiently large quantity of an
asset that allows them to control the price, in effect creating a monopoly.
Spoofing
Spoofing is a disruptive algorithmic trading activity employed by some traders to
outperform other market participants and manipulate market prices.
Pools
Agreements, often written, among a group of traders to delegate authority to a
single manager to trade in a specific market for a specific period of time and
then share the resulting profits or losses.
(Information obtained from ElTradingMexico)

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4.1 - Fakeouts
This kind of manipulation is very common in short term trading. What happens
is that the price reaches a resistance/support zone and after several touches
breaks that zone, and then re-enters the zone, misleading retail tarders on the
direction of the price.

ZONE WE’RE AIMING

RESISTANCE

SUPPORT

ZONE WE’RE AIMING

In the chart on the left the price respects the resistance, after a few touches it
breaks it (marked in red) and looks for a new high. Our job sometimes is to find that
zone, thanks to supply and demand (two pages later). The price, after retesting
the zone, returns below the resistance. This set of actions carried out by the
institutions deceives most traders by positioning themselves to buy after the
breakout, and then the price turns around resulting in losses for the trader and
usually profits for the market mover.

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Let's look at this example in a graph:

INSTITUTIONAL SELLS

RETAIL TRADER’S BUYS

PRICE RESPECING RESIS.

SL TRADERS MINORISTAS

In this chart we can see how the price is respecting a resistance. After 4 touches,
the price breaks this resistance, and many traders start placing buy orders.
Once the price reaches a new high, the institutions begin to place orders taking
advantage of the liquidity offered by buyers, thus taking the price down in a
very violent way, as we can see in the chart, taking all the stop losses of retail
traders ahead and earning big profits. Next, we will see how we can identify this
maximum in order not to fall into the trap of the institutions.

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To try to find that maximum, we have to look for areas of supply and demand
nearby.

ZONE WE’RE AIMING OFFER

RESISTANCE

SUPPORT

ZONE WE’RE AIMING DEMAND

Let's take a look at this in a graph: (next page)

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 FAKEOUT

SUPPORT FORMED

SUPPLY BECOMES DEMAND ZONE

RETEST BUYS

In this image we see how the price respects a support, marked with a pink line,
(more visible in smaller timeframes). After a few touches it breaks the support
(marked with a red circle). We have identified a potential demand zone nearby,
so we will wait to see if the price rejects it. Finally, if it rejects it and gives us a
good buying opportunity. Always placing the stop a few pips below the zone. Do
you see the risk:reward ratio of this type of operations? In this case it could be
1:5.

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This is a very clear example of how to stop this kind of manipulation. We see
how the price respects a resistance and after several touches breaks it, Our task
is to find a nearby bid zone (marked in green). Next, we see how the price after
entering the bid zone, makes an engulfing candle and it is our opportunity to
enter in sale (blue circle). Placing our stop a few pips above the zone. Again, the
risk:reward ratio is very favorable.

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4.2 - The pattern of Quasimodo
The quasi-mode pattern is very similar to the fakeout. But in this case, we will
wait for a low below the low before breaking out, a pullback to
resistance/support and then we would position.

FAKEOUT RETRACEMENT TO RESISTANCE

PERFECT SELLS

LOWER LOW CREATED

AFTER FAKEOUT

In the image you can see how the quasi-mode pattern is very similar to a
fakeout, only that we wait for a low below and a pullback to resistance, to
further confirm the sell-off.
The price after the fakeout, re-enters below the resistance and to confirm the
false break, we wait for a low to be made below the low before breaking this
resistance (previous low).

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marked with a purple line and the minimum we are looking for marked with a
red circle). Once this minimum has been reached, we will wait for a pullback to
the resistance to position ourselves to sell.

This is how we would see it on a graph:

RETEST SELLS

RESISTANCE

LOWER LOW
CREATED AFTER
FAKEOUT

The price respects a resistance marked in pink, after several touches it breaks it,
but then rejoins (fakeout), we wait for the price to make a lower low (marked in
red) and a retracement to the resistance. Once retraced, we will look for a
rejection and sales (marked in blue).

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On the next page we will see this pattern in a shopping scenario.

HIGHER HIGH
CREATED AFTER
FAKEOUT

RETEST BUYS
FAKEOUT

It is the identical pattern, but inverted. The price respects a support, after
several touches it breaks it, once it rejoins we look for a maximum above the
previous one to the break, after this maximum we look for a retracement to the
support and we position ourselves in purchase.

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4.3 - Compression
Now we will see a very common pattern when news is coming and the price is
approaching the bid and ask zones. Compression is basically the emptying of
buy and sell orders in preparation for impending news (such as the NFP).

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In the chart of the previous image we can see a green rectangle that is indicating
the compression zone in a bullish cycle.

In this image we observe marked in blue a supply zone. In green I have marked
the compression prior to the NFP news.
In a bear market, compression occurs when the market makes lower and lower
highs and lower and lower lows, suddenly large buy orders come in and drive
many sellers out of the market at a loss. In a bull market, it would be just the
opposite.

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 5. JAPANESE CANDLES
5.0 - What are Japanese candlesticks?

By now you should already know what Japanese candlesticks are. In this first
section about them, we will explain a little of their history.

As the name suggests, Japanese candlesticks originated in Japan. The Japanese

were the pioneers in using technical analysis to trade the rice futures markets,
which was created as a consequence of the country's own military history.

Munehisa Homma, from Sakata, traded in the rice market at the Osaka
exchange. He created a network of names between Sakata and Osaka to
communicate rice prices in order to anticipate and formulate profitable
contracts.

Homma observed that price was not only affected by supply and demand, but was
also influenced by the emotions of traders.

Homma realized that the most effective way to analyze these emotions was to
use Japanese candlesticks, and to this day, Homma is right.

Candlestick analysis offers a quick representation of short-term market

psychology, as it studies the effect, not the cause. (EsBolsa)

In this section number 5, you will learn all the essentials you need to know to
trade Japanese candlesticks, you will also learn how to analyze and identify the
best candlestick patterns and apply them to your trading.

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5.1 - DOJI patterns
It is worth noting that there are more than 60 different types of patterns. You
will find many traders who know them all, but it is not necessary. The important
thing is to understand the emotions behind each candlestick, as each one will
tell a different story and contextualize you in one way or another.
Let's start with possibly the most common and frequent pattern, the DOJI.
DOJI LIBÉLULA
This doji is T-shaped, and is visible when the opening, high and closing price of a
candlestick are practically identical. And the minimum price forming a very long
shadow.
The information to extract from this pattern is that sellers have tried to push the
price down, but buyers have prevented them from doing so, keeping the price
in the opening zone.

Maximu
Opening m Closing

Minimu
m

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 DOJI LAPID
This doji is exactly the same as the dragonfly, but inverted. The open, low and
close price are virtually identical, while the high price is a large shadow. From
this doji we know that the buyers have tried to push the price up, but the sellers
have prevented them from doing so by sending the price back to the opening
zone.

Maximum

OpeningClosing

Minimum

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 LONG-LEGGED DOJI
This pattern is formed when the high and low price have approximately the
same distance from the opening and closing price, which are also almost equal.
In other words, during the session the buyers have tried to push the price up,
but the sellers have prevented them from doing so, trying to push it down. The
end result is that the shadows measure almost the same and the opening and
closing prices are also almost identical.

Maximum

Opening Closin
g

Minimum

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5.2 - Cufflinks
The candlestick pattern called "twins" is visible when 2 candlesticks have the
same body and shadow. This pattern indicates indecision in the markets. Sellers
and buyers struggle to pull the price in their direction, leaving two candlesticks
with the same dimensions. This pattern may indicate a reversal.

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5.3 - Spinning tops
The candlestick pattern called "spinning tops" is very similar to the long legged
doji, but in this case it is two candlesticks together. This pattern again indicates
indecision, like the twins pattern. It can also indicate a change in the trend.

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5.4 - Hammers
Hammer
This pattern is composed of a small body and a long shadow below. With this
pattern we see how the sellers try to take the price down, but the buyers push
up enough to leave a small body and a long shadow underneath. This pattern
may indicate a change in trend.

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 Inverted Hammer
The inverted hammer pattern is exactly the same as the hammer, but inverted.
This pattern can also indicate a change in the trend.

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5.5 - Enclosures
A bullish engulfing candlestick is when a bearish candlestick forms, followed by
a bullish candlestick which has a closing price higher than the opening price of
the bearish candlestick. This candlestick is telling us that the upward pressure of
the last session is higher than the downward pressure of the previous session.
Indicating a potential change of trend to the upside. In the case of a bearish
engulfing, it would be when the closing price of the bearish candlestick is higher
than the opening price of the bullish candlestick.

Closin
g

Opening

Opening

Closing

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5.6 - The hangingman
The hanging man is like the hammer, but in its bearish version. It has exactly the
same shape, but forms at the end of an uptrend. It has a small body and a long
shadow underneath. This pattern may indicate a change in trend.

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5.7 - Shooting star
Finally, the shooting star is exactly the same as the inverted hammer, but it
forms at the end of a downtrend and can give way to a new uptrend. It has a
small body and a long shadow above it. This pattern may indicate a change in
trend.

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